There is an emerging issue under both the participant and plan
disclosure rules concerning the information that must be provided for asset
allocation models (AAMs).

It appears that some DOL officials are of the opinion that
asset allocation models—at least under certain circumstances—are "designated
investment alternatives” or DIAs. If AAMs are classified as DIAs, they are
subject to disclosure requirements under both the plan and participant
disclosure rules. As a practical matter, it may be impractical or even
impossible for recordkeepers, broker-dealers and RIAs to provide that
information.

Recordkeepers must provide information about the expenses of
DIAs to responsible plan fiduciaries. And, plan fiduciaries must give
participants certain information about DIAs, including performance history and
expense ratios. Also, plan fiduciaries must maintain a website that includes
other detailed information, such as portfolio turnover ratios for the DIAs. As
a practical matter, providers will maintain these websites.

Finally, the final plan disclosure regulation requires that
covered service providers (which would include recordkeepers, broker-dealers
and RIAs) give the information needed for participant disclosures to
responsible plan fiduciaries on or before the date on which the investment
alternatives are designated. In other words, that information has to be
provided to plan sponsors at the inception of the relationship (or, for
existing plans, by July 1, 2012).

So, the key issue is whether—and under what circumstances—AAMs
are considered to be DIAs. That is because, when an asset allocation model
constitutes a designated investment alternative, all of those 408(b)(2) and
404a-5 disclosure requirements apply. It is our understanding that it may be
difficult, if not impossible, to provide the needed information—at least in the
short term. As a result, we are already hearing of recordkeepers who are
refusing to allow asset allocation models on their platforms.